Chinese Studies
2013. Vol.2, No.3, 113-120
Published Online August 2013 in SciRes (
Copyright © 2013 SciRes. 113
Determinants of Entrepreneurship Success: An Examination of
Chinese-Owned Businesses in Congo Brazzaville
Edwige Kamitewoko
Centre of Research and Prospective Studies/Faculty of Economy, Marien Ngouabi University,
Brazzaville, Congo
Received May 8th, 2013; revised June 28th, 2013; accepted July 8th, 2013
Copyright © 2013 Edwige Kamitewoko. This is an open access article distributed under the Creative Commons
Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the
original work is properly cited.
The determinants of Chinese entrepreneurship Success are widely studied in the economic literature in
recent twenty years. However, in the case of Congo Brazzaville where immigrant entrepreneurship takes
an important proportion in workforce, it remains an under researched area. By using the data from the
Prospective Research Center Studies Survey questionnaire, this paper aims to provide clearer insights into
this area. The study is based on Brazzaville which is the capital of Congo, a sensitive center of commerce
and a nucleus of entrepreneurship activities; it identified the foundation factors that enable Chinese entre-
preneurs to success in their entrepreneurship in Congo Brazzaville. Two hundred respondents were sam-
pled and their responses were modeled using the logistic regression. The findings show that key factors,
such as: guanxi, education, experience in trade and finance experience play an important role to the suc-
cess in their entrepreneurship.
Keywords: Entrepreneurship; Logit; Success Factors; Chinese Immigrant; Congo Brazzaville
Immigrant entrepreneurship in developing countries has re-
ceived extensive scholarly and policy attention. Public interest
in this topic is high as entrepreneurship is found to play an im-
portant role in economic development. Entrepreneurship gives
immigrants social dignity in the host country, but is also a very
challenging initiative given the various obstacles they face.
Therefore, no matter the potential of success of their entre-
preneurial project, it’s difficult for new immigrants to find the
start-up capital, and they generally must rely on the support of
family and friends for this capital. Also, they can’t easily hire
employees from the mainstream society of their host country
because their financial constraints don’t allow them to pay the
normal salaries and grant the usual benefits legally expected by
employees. Consequently, they end up with very long work
hours. There are many other obstacles immigrant entrepreneurs
have to face in order to survive in the host countries. Unfortu-
nately, for many years economist researchers have not focused
on immigrant entrepreneurship, thus leaving the study of that
phenomenon to anthropologists, managers and sociologists.
However, after years of comparative neglect some researchers
in economics have started to work on immigrant or ethnic en-
trepreneurship. Research on the economics of entrepreneurship
—specially upon self-employment is beginning to expand. Mi-
croeconometric work includes Fuchs (1982), Rees and Shah
(1986), Pickles and O’Farrell (1987), Borjas and Bronars (1989),
Evans and Jovanovic (1989), and Evans and Leighton (1989).
Even if that effort has started to make a difference in the litera-
ture, there still remains much to be known about the phenome-
non of immigrant entrepreneurship especially in developing
countries such as African countries which are receiving since
the late 90, an increasing number of immigrants from Asian
countries. The purpose of this paper is to contribute to the fill-
ing of this gap.
It is known that, Since China’s engagement with Africa with
regard to trade, investments, assistance, and—not least—diplo-
matic activities, the number of immigrants from china has been
sharply increased. A recent article on Net Ease 2013 pointed out
that in 2007, over 750,000 Chinese stayed or worked in Africa,
this number reached more than 1 million in 2013. Congo Braz-
zaville didn’t escape to this reality. Kamitewoko (2012) shows
about 20.000 Chinese live in Congo Brazzaville in 2012, while
they were about 10,000 in 2010. Like other recent immigrants
group in Congo, a high proportion of Chinese immigrants are
currently engaged in self-employed small business. These en-
trepreneurial activities serve further as a route of economic
advancement and social mobility for the successful immigrant
groups in their new host countries. Only, while some of the
immigrants succeed in their entrepreneurship the others failed;
which socio-economic characteristics explain the successful
with regard to immigrant entrepreneurship? What are the de-
terminants of successful Chinese immigrant entrepreneurship in
Congo Brazzaville? Do observable characteristics explain their
success, or is there a country-specific effect at work? Which are
the driving factors leading to their success?
Our main objective focuses on the analysis of the factors
leading to success of Chinese immigrant entrepreneurship.
One hypothesis is that high levels of education contribute to
the success of Chinese entrepreneurs. Another hypothesis is
that immigrant’s entrepreneur’s social networks are conducive
to entrepreneurial success.
Regarding the area of microeconomics, the approach is rather
labour market oriented than business-oriented: we focus on the
entrepreneur’s occupational success rather than on the enter-
prise’s performance. The central unit is the individual immi-
grant entrepreneur.
This study proposes to gain insight into the factors which
lead Chinese immigrants to succeed as entrepreneurs. However,
definitions of entrepreneurship differ widely (Van Praag, 1999).
For instance, Schumpeter (1949) defined entrepreneurs as peo-
ple who were able to change a new idea into successful innova-
tive ventures. Yet, Gartner (1985) sees it as the creation of new
businesses, while Kirzner (1979) defines it as people who are
looking out for new opportunities. This is a problem in entre-
preneurship studies and it should be noted that because of this
weakness, direct comparability between studies becomes diffi-
cult (Carland, Hoy, & Carland, 1988). McCarthy and Nicholls-
Nixon (2001) argued that researchers should clearly state the
definition being used in their study. In the light of this state-
ment, this study therefore defines an entrepreneur as a person
who has a registered business and employs at least one person.
This paper is structured as follows: Following this introduc-
tion, Section 2 contains a concise review of previous work, We
present Chinese entrepreneurs in Congo Brazzaville in Section
3. Section 4, contains the methodology and data description. In
the following Section; we portray the evidence gathered from
the regressions and present the results. Finally, in the last sec-
tion, we synthesize our findings.
Literature Review
According to Organization of Economic Cooperation and
Development (OECD, 2003) entrepreneurship is a process
through which entrepreneurs create and grow enterprises to
provide new products or services, or add value to products or
services. According to them, the characteristics of seeking op-
portunities, taking risk beyond security and having tenacity to
push an idea through to reality combined into special persfec-
tive that permeates entrepreneurs.
Numerous studies reported on the research related to the fac-
tors leading to business success and revealed that there is a
strong link between managerial skills and business success
(Chu, Benzing, & McGee, 2007; Benzing, Chu, & Szabo, 2005;
Yusuf, 1995; Gosh, Kim, & Meng, 1993). According to Huck
and McEween (1991) Jamaican entrepreneurs’ success depend
on their understanding of customers’ need, access to capital,
support of family, and networking with friends from former
schools and colleges. It should be noted that the importance of
family to the success of a business in China can never be em-
phasized enough. Due to an extremely low level of funding
available to small and medium-sized enterprises in the country,
family members not only are the source of start-up funds, but
entrepreneurs’ wives and children are often asked to work when
no reliable employees can be found (Liao & Sohmen, 2001).
Vietnamese entrepreneurs however believe that friendliness to
customers, having a good product at a competitive price, good
customer services and a reputation for honesty are especially
important factors leading to business success (Chu & Benzing,
2004). According to Cheng and Espiritu (1989) Koreans and
Latinos share an “immigrant ideology” which considers hard
work and frugality as keys to success in America. Many re-
searchers pointed out that the success attained by Korean busi-
ness owners is a result of hard work, long hours spent in their
business (Bonacich, 1979; Kim, 1981; Light & Bonacich, 1988;
Min, 1988; Min & Jaret, 1985; Young, 1983).
Being from certain ethnic groups also may enhance the prob-
ability of successful entrepreneurship. Iyer and Schoar (2008)
look at the market for wholesale pens in India amongst three
different ethnic groups. They found the Marwari group, known
for being particularly business savvy, were better at fostering
long term business relationships, especially within their own
community, than other ethnic groups. Enrico Santarelli and
Hien Thu Tran (2013) show that human capital strongly pre-
dicts firm success, with learning exhibiting a statistically sig-
nificant positive association with operating profit, benefits from
weak ties outweigh those from strong ties, interaction of human
capital and social capital displays a statistically significant posi-
tive effect on new-firm performance.
Determinants of business success also vary in nature. For
example, Kraut and Grambsch (1987); Kallerberg and Leicht
(1991) found size of investment and access to capital (Cooper,
1985; Hisrich, 1990; Krueger, 1993; Lussiers & Pfeifer, 2001;
Raman, 2004; Panda, 2008) found experience of entrepreneur
as factors affecting business success. Meng & Liang (1996)
found no impact of experience on business success. Hisrich,
1990; Kallerberg & Leicht, 1991; Krueger, 1993, Rowe et al.
1993; Lussiers & Pfeifer, 2001; Masuo et al., 2001; Thapa,
2007; Indarti & Langenverg, 2008; found that the education has
positive effect in business success. Minniti and Bygrave (2003)
have stated that people with more education are not necessarily
more entrepreneurial. Kraut and Grambsch (1987), Hisrich
(1990) Kallerberg and Leicht, (1991), Krueger (1993), Rowe et
al., (1993), Masuo et al., (2001) found that age and support
networks have positive contributions in business. Zimmerrer
and Scarborough (1998) pointed out that most of entrepreneurs
in the United States start business during their 30s and 40s,
many researchers founded that there is no limit of age for their
entrepreneurial aspirations. Age difference at the start of busi-
ness seems to have no association to business success. Accord-
ing to Staw (1991), at the start of any business age is not a key
factor, but with enough training and preparation, the earlier
someone starts business the better. Staw (1991) also notes that
age is related to business success if it includes both sequential
age and entrepreneurial age. This means that the older an entre-
preneur is, the more experiences in business he has. Age thus
implies wide experience. Kallerberg and Leicht (1991), Rowe
et al., (1993); Masuo et al., (2001); Rose et al. (2006) has stated
that the success of the business depends on skills, and training.
Cooper (1985), Green and Pryde (1989), Raman (2004) found
that motivational factors such as initiatives, third party assis-
tance, encouragement by family and friends, skill and economic
conditions leads to the success of the entrepreneurs.
Bosma et al. (2009) in their effort to investigate the determi-
nants of successful entrepreneurs adopted a multiple regression
approach based on the ordinary least squares technique to meas-
ure the influence of each determinant on success, while control-
ling for the other determinants. They identified variables relat-
ing to human capital, financial capital, strategies for keeping up
with the business, social capital and control variables (gender).
Each success measures the relations between determinants and
success. The study discovered that; the amount of human capi-
tal is especially important for determining duration and profit,
while financial capital is especially related to employment. Social
capital and strategies for retrieving relevant information seem
to be about equally important for all success measures. Specifi-
Copyright © 2013 SciRes.
cally, entrepreneurs at higher age (age is used as a proxy to
knowledge of the world) seem to make less profit and to create
less employment than younger entrepreneurs do. However, the
average duration of the founded firm is higher so also younger
entrepreneurs have higher probabilities to quit the business early.
The educational level of the entrepreneur also matters for suc-
cess, though only when profits are considered. Experience is
also important in determining success. Having had experience
in the same sector as the newly founded business increases the
probabilities of success in making profits and in surviving.
Despite the cumulating literature on determinants of suc-
cessful immigrant entrepreneurship, there is no studies about
Chinese immigrants to Congo Brazzaville establish own busi-
nesses, engage in self-employment and factors leading to their
economic success hence the interest of this study.
Chinese Entrepreneurs in Congo Brazzaville
With China’s interest in Africa also come Chinese immi-
grants. Mister Chen is one of those thousands of new arrivals to
Brazzaville. He and his family moved from China’s southern
Wenzhou 温州 in Zhejiang province three years ago to come
to Africa. When he first learned of the opportunity to come to
Congo brazzaville, he admitted that he knew nothing about the
country as was made clear by their decision to settle in the
eastern Congolese city.
Upon arrival to Congo he was introduced to a “Chinese asso-
ciation” that would provide him the logistical and financial
support for him to open a small shop in one of Brazzaville
neighborhoods. These associations are critical to understanding
the success of the Chinese, both here in Brazzaville and the
world over. Just as Chinese immigrant associations in San
Francisco and New York, the Chinese associations in Congo
provide what is essentially a micro-loan to new immigrants and
the necessary logistical support to open a small business. The
association handles the legal paperwork, ensures the necessary
bribes are paid to relevant neighborhood police and government
authorities; connects the shop owner with a distribution net-
work of Chinese importers to supply their business. Mister
Chen said he arrived from China with “only a few dollars” but
was able to get his start through the help of the association and
personal connection (guanxi 关系).
In turn, as his business develops, he re-pays the association
back in small increments until the loan is fully paid.
His business grew quickly; he made money and local friends.
But after a few years he grew weary of the long buying trips to
China. So he and his wife bought a large plot of land in Braz-
zaville. On it they constructed a spectacular Chinese-Korean
restaurant, with private dining areas, karaoke rooms and a giant
100-seat dining hall. To the side of the restaurant they built a
bedroom, which became their home. The business prospered,
and soon he started additional enterprises including a bakery, a
firm selling flat-screen televisions and a security company. All
of this couldn’t be possible without guanxi.
“Chinese don’t think, they just try without studying the mar-
ket too much. Otherwise, the chance is gone,” he says.
Characteristics of Chinese Immigrant Entrepreneurs:
Chinese Social Network, Professional and Technical
The growing scale and diversity of the Chinese immigrants’
community in Brazzaville during the last ten years generated a
proliferation of professional and technical associations. This
proliferation corresponded with the growing visibility and suc-
cess of Chinese run businesses.
However, despite this formalization, informal guanxi net-
works remain a key component in entrepreneurship success. The
entrepreneurs themselves give this “guanxi” networks much
Guanxi Network
Guanxi is a complex phenomenon. The Chinese phrase “guan-
xi” consists of two characters; the character “guan” means a
gate or a hurdle, and “xi” refers to a tie, a relationship, or a
connection. Guanxi literally means “pass the gate and get con-
nected” (Lee & Dawes, 2005). It has its roots in the cultural
philosophy of Confucianism. Confucianism considers society
as a huge network in which a person plays different roles. This
is important, because in Chinese culture the collective is always
considered more important than the individual. There are four
kinds of basic relations in society: emperor-subject, father-son,
husband-wife, friend-friend.
Depending on these four kinds of relations, society achieves
a balance (Gao & Tian, 2006), the Confucian ideal. Fan (2002)
has identified a modern guanxi base, Family (e.g. kin and
in-laws) Relationship by nature (e.g. from same town; class-
mate; same profession) Relationship acquired (e.g. friend).
Interestingly the first are blood ties but the second and third
are social. Thus, even today, Confucian tradition defines indi-
viduals in relational terms (Yang, 1994). Unlike Christianity,
which puts individuals in reference to God, Confucianism re-
lates individuals to their significant others (Bian & Ang, 1997).
Thus Chinese society has been seen to be organized by concen-
tric guanxi circles, extending outwards from the family (the
core) to relatives, friends (Don & Dawes, 2005). The web of
these obligations can be seen as the fabric of Chinese society.
Guanxi form the bases around which all social structures are
embedded in China (Bian, 1994). Resultingly, the Chinese
maintain that having good guanxi is synonymous with positive
functioning in society (Luo, 2000; Tsui & Lau, 2002; Yang,
1957). Consistent with this theme, the current Chinese man-
agement literature consistently highlights the importance of
guanxi as crucial to business success in China (Farh et al., 1998;
Tsang, 1998; Wall, 1990, Yeung & Tung, 1996). Additionally,
China is the largest, fastest growing transition economy and the
most heavily engaged in international business (Child & Tse,
2001). Taken in conjunction with one another, these two in-
sights hold important implications for business in China. Es-
sentially, guanxi are vital to successful business in the world’s
largest, fastest growing transition economy.
Bian (1997) suggests that the most important characteristic of
guanxi is the reciprocal obligation to exchange favors. Failure
to reciprocate favors may result in the loss of one’s guanxi
network and the multiple resources embedded in it, so guanxi
relationships are long-term and the parties may not have any
requirement for immediate return (Li & Wright, 2000; Milling-
ton et al., 2006).
Data Description and Methodology
We have access to the Centre of Research and Prospective
Studies survey data which were collected in two step: first step,
from January 2009 to February 2009, and the second from
Copyright © 2013 SciRes. 115
January 2013 to February 2013 in Brazzaville, data consisting
of 200 Chinese entrepreneurs who started a business in 2009.
The respondents gave detailed information on themselves, on
their environment and on their strategies. Of the 200 entrepre-
neurs, 116 were men and 84 were women. They were allowed
to express their views in the language with which they were
most confortable (English or Mandarin Chinese).
The survey also provides a series of information about Char-
acteristics of Business Owners (CBO) to explore the role that
human capital, financial capital and other factors play in con-
tributing to the relative success of Chinese owned businesses.
The CBO contains a large sample of Chinese-owned businesses
and detailed information on the characteristics of both the
business and the owner.
A migrant is defined as a household member who is working
outside the country and has left his/her country of origin for at
least one month and entrepreneur as a person who has a Regis-
tered business and employs at least one person. We restrict the
samples to include individuals ages 25 - 66.
For measuring entrepreneurs successful in business there are
a numbers of methods such as: net profit after tax reduce,
amount of tax paid during the last three years, rate of produc-
tivity (input-output ratio), current assets ratio (ratio of current
assets to current debt), increase business capital, increase prod-
ucts, services and sale, keep working since three years ago and
active in the business. In this study due to the difficulty of ac-
cess to all those information and data, we use the last three
indicators for measuring this success.
Determinants of Success
In this section we explore the determinants of successful en-
trepreneurship that arise from literature. The classic views on
entrepreneurship produce possible success determinants for
starting entrepreneurs. These are summarised in Table 1, which
is taken from Van Praag (1999). In this study we shall empiri-
cally test proposed determinants that stem from these classical
views, as well as some other determinants proposed in literature.
Table 1.
Determinants of successful entrepreneurship discussed by the classic
authors (taken from Van Praag, 1999).
Having success as entrepreneur Start and be a successful
Cantillon Alertness and foresight
Bear risk
Judgement, perseverance,
knowledge of the world, business
and occupation
Bear risk
Intelligence, general ability
(dependent on family background
and education)
Knowledge of the trade
Bear Risk; Leadership
Own capital
Good fortune
Father entrepreneur
Schumpeter Leadership
Ability to deal with uncertainty:
foresight,intellectual capacity
Good luck
Creativeness and leadership to
profit opportunities
Some general classification of the determinants will be clarify-
ing. We make a distinction between determinants that are re-
lated to human capital, financial capital and social capital de-
Determinants of Success: Operational Variables
A large number of possible determinants came along in ex-
ploring literature review. Obviously, not all determinants can be
included in our analysis.
Some items can simply not be measured, like “good luck”.
Others may not be included in the dataset. Moreover, some
determinants could be constructed but were excluded in the
process of estimation. The variables included are described in
the framework of our classification (see Appendix). For each
determinant some brief explanation and the definition are pro-
vided. Most determinants become operational as dummy vari-
The Research Method
A large amount of research has been completed on deter-
mining what leads to successful entrepreneurship, and the char-
acteristics of the successful entrepreneur (Blanchflower, 1998;
Evans & Leighton, 1998). Given firm data on the characteris-
tics of entrepreneur ventures, the standard choice from the
economist’s toolkit is to run probit or logit regressions (Harada,
2003). The dependent variable is a binary measure of entrepre-
neur success or no success, and the independent variables are
potential explanations for success.
Formally, the model logistic regression model is that:
og 1()
Solving for, tis gives
,, 11
xbw ee
ββ ββ
a businand tim icie
A binomial logistic regression model was formulated to de-
termine the relative impact of factors on an immigrant entre-
preneur’s success in a small business. The binomial logistic
regression model is shown in (1).
βεsuccess x∗=+ (1)
The estimated model can be viewed below, where the de-
pendent variable is whether or not an immigrant entrepreneur
succeeded in ess, α β are esated coeffnts.
12 34
success∗= ++αβ βββ
The Statistical Package for Social Sciences (SPSS) was used
for the analysis. We include the antecedent variables on finan-
cial experience as control variable.
The results of the estimation are presented in Tables 2 and 3.
From the above table, four independent variables in decreas-
ing order of importance are obviously significant, namely:
guanxi, education, experience in trade and finance experience.
Copyright © 2013 SciRes.
Guanxi, or relationships/connections with others, has been
identified as playing a key role in business success in China.
A guanxi network as it was already mentioned above, helps a
firm overcome the lack of resources to accommodate growth
while alleviating substantial bureaucratic costs that would result
from internalizing operations. In markets, people see one in-
visible hand—price, while in China, another hand guanxi, is
seen as a potential solution for most problems of entering and
operating in China. While guanxi plays the role as the “proto-
col,” setting the rules governing the communication and the
transfer of affection between individuals in Chinese societies,
the teaching of Confucianism deeply rooted in effect constructs
the norms of guanxi for its establishment and maintenance.
Guanxi in Chinese society is the basis on which they exchange
a lifetime of favors, resources, and business leverage. It projects
a preference for cooperation, group decision-making, and rela-
tionships. Thus, the importance of guanxi and its networks lie
in their emphasis on collectivism and group harmony, and in
turn help the business to achieve an integrated success.
The important role that Guanxi plays can be summarized in
the Chinese expression, “one more connection offers one more
road to take” (Seligman, 182).
Education and guanxi influence positively entrepreneurship
success; this findings confirm our hypotheses. Education is tradi-
tionally viewed as an investment for the future. There is abun-
dant evidence in every-day life and scientific literature for the
fact that the acquisition of education improves the future earn-
ings and overall success of individuals (Angrist & Krueger,
1999). They are generally regarded as rather original persons
who may have learned their business skills without too much of
formal education. There are numerous studies on various links
between self-employment, education and the success of self-
employed (Chandler & Hanks, 1994; Evans & Leighton, 1990;
Holtz-Eakin et al., 2000; Mosakowski, 1993). As in many studies,
the coefficient on the variable education is highly significa-
Table 2.
Variables in the equation.
B S.E. Wald df Sig. Exp (B)
Step 0 Constant 1.295 .172 56.612 1 .0003.651
Table 3.
Variables in the equation.
B S.E. Wald df Sig.Exp (B)
AGE .168 .242.481 1 .4881.183
EDUC 1.474 .5507.184 1 .0074.368
EXPSEC .055 .507.012 1 .9131.057
EXPTR 1.541 .5408.153 1 .0044.668
EXPEMP .823 .5951.913 1 .1672.278
FINEXP (1) 1.539 .5507.841 1 .0054.661
CONPAR .143 .571.063 1 .8031.154
FAMLOAN .336 .525.408 1 .5231.399
ENTREF .296 .514.332 1 .564.744
GUANXI 3.977 .62740.230 1 .00053.363
Step 1a
Constant 4.692 1.5319.394 1 .002.009
Note: aVariable(s) entered on step 1: AGE, EDUC, EXPSEC, EXPTR, EXPEMP,
tive indicating the importance of formal educational policies as
feeding entrepreneurial success. Education increases an indi-
vidual’s propensity to entrepreneurship success.
There is a positive relationship between entrepreneur’s trade
experience and their probability of success. These results are
confirmed by the studies of Mirry (1998), Patrick Kreiser,
Louis Marino, K. Mark Weaver (2003) and Covin, J. G., &
Slevin, D. P. (1991). In fact, Individuals with business owner-
ship experience believed that the obstacles to launch and con-
tinues a business could be overcome as compared to individuals
without business ownership experience.
Experience is important in determining success. Having had
experience in trade as the newly founded business increases the
probabilities of success in making profits and in surviving. Ex-
perience in self employment only matters for achieving higher
profits. Financial experience is seen to be also favorable for the
duration of the firm.
Prior experience has a direct and positive association with
entrepreneurship success; this is particularly important in de-
termining how difficult it is for migrants to assimilate into the
host country in respect of, for example, education and past
working experience.
Immigrant Self-employment and entrepreneurship are eco-
nomic phenomena of significant importance.
Entrepreneurs are responsible for the success of their busi-
nesses and have to face up with definite challenges in doing so.
To know what constitute critical determinants of Chinese im-
migrant entrepreneurship success data were collected from 200
entrepreneurs randomly selected respondents in Brazzaville,
who were administered with structured questionnaires. Regres-
sion analyses of the findings showed the positive and signifi-
cant impact factors of guanxi, education, experience in trade
and finance experience.
This research may be of interest to policy makers, small
business consultants and academics because it highlights key
success factors relevant to Chinese based businesses and the
challenges they face.
Following the findings of this research, future study may
choose to investigate the determinant of location for immigrant
economic activity by verify other interaction effects of entre-
preneurs’ networking.
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Explanatory Variables Brief description and measure
1. Human capital
Age (AGE)
Education (EDUC)
Experience in the sector (EXPSEC)
Experience in trade (EXPT R)
Experience as an employee (EXPEMP)
2. Financial capital
Financial experience (FINEXP)
Contribution by business partner(s) (CONPAR)
Received loan from family (FAMLOAN)
3. Social capital
Entrepreneurs in the family (ENTREF)
Contact with entrepreneurs in networks or guanxi (GUANXI)
Human capital relates to the intrinsic qualities and is thought to have a positive influence on the
success of starting entrepreneurs. Knowledge is an important factor in this respect, which may
be acquired through general education or through time.
The age of the entrepreneur can be considered as a measure for knowledge of the world. In the
survey, the respondents were asked to state the age category they were in (intervals of 5 years).
The age variable takes on the value of the mean of the age interval divided by 10. For example,
if an entrepreneur is in the category 20 - 25, the age variable takes on the value of 2.25.
The level of education for the entrepreneur is important for business operations
If an entrepreneur has experienced a high level of education (university or high-level vocational
training), the dummy variable for education attains the value one (and zero otherwise). In the
survey, people were asked to choose the highest education level they have completed.
This dummy variable indicates whether the respondent has experience in working in the same
sector as he started business.
Kolvereid (1996) found that individual with prior business experience had significantly higher
rate of success than those without such experience.
If the entrepreneur is already familiar with trade, this may enhance his results. The dummy
variable attains the value of one if there is some experience in trade, and of zero otherwise.
Having experience as an employee may be beneficial to the starting entrepreneur, as it will
enhance knowledge of business. The dummy variable equals one if the respondent has been an
employee and zero if this is not the case.
Almost every entrepreneur needs a substantial financial input. The financial resources of the
starting entrepreneurship are therefore important.
Many questions regarding this topic are posed in the center of research and prospective studies
Finance is an important aspect of entrepreneurship. Some knowledge on financing the business
is almost a necessity. If the entrepreneur has some financial experience himself, the variable
equals one (and zero otherwise).
Maybe a business partner makes some financial contribution. This partner will (possibly)
benefit from the new business. This will again be indicated using a dummy variable.
If the family comes to help in the financing part of starting business, this is indicated by another
dummy variable.
In order to have success as an entrepreneur, the importance of communicating with relations
seems to be growing and growing. Having capabilities in this respect can be indicated as
owning social capital1. Also in literature, increased attention is paid on the relation between
social capital and entrepreneurship.
Being influenced by self-employed members of the family can be a determining factor for
success. For this, a variable is constructed that has value one if the entrepreneur reported
considerable influence of self-employed family
members, and zero if this is not the case.
An important way that people get access to information is through interaction with other people
i.e networking and linkages (guanxi)
This variable indicates whether the entrepreneur has often (value equals one), or never (value
equals zero) contacts with other entrepreneurs.
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